Monthly Archives: September 2011

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A few weeks ago, the Census Bureau released troubling data showing that the U.S. poverty rate jumped from 14.3% in 2009 to 15.1% in 2010, the highest it’s been in 17 years. Now economists from the Peterson Institute report that one third of the increase in poverty over the past year was caused by rising gasoline prices. The U.S. makes up a smaller share of world demand for oil than it did in the past, so, while global oil prices dropped during the height of the recession, they rebounded strongly last year despite America’s continuing economic difficulties. In 2010, the price of crude oil increased 30% and gasoline prices rose by 18%, pushing nearly 1 million people into poverty.

How do we close the gap in college attendance between children from low-income families and those from middle and upper-class backgrounds? Existing research shows that providing financial support is critical to helping students afford college (and feel financially comfortable enough that they choose to attend), but new studies suggest that money alone may not be sufficient.

A cross-national analysis shows that while out-of-pocket educational costs for low-income college students are lower in the U.S. than in Canada, significantly fewer young adults from low-income backgrounds attend college in the U.S. The gap between the share of young adults from the lowest income bracket who attend college and the share from the highest income bracket who attend is about twice as large in the U.S. as in Canada (20 percentage points versus 45 percentage points). This pattern persists despite the fact that educational costs for low-income students are lower in the U.S. than in Canada** and even after controlling for other differences between Canadian and American students. While financial aid is obviously critical to making it affordable for low-income students to attend college, it is not enough to close the gap between low- and high-income students (if it was, we would expect to see a smaller gap in the U.S. than in Canada).

Another set of studies looks at the impact of students’ college savings on their likelihood to attend university. The researchers find that young adults from low and middle-income families who, as teenagers, set aside their own savings to pay for college are almost twice as likely to end up attending school as those who don’t. Further exploration reveals that this finding only holds true for students who, as teenagers, report being fairly certain that they will one day graduate college. For those who report being unsure whether they will graduate from college, saving money for university has no impact on whether they eventually attend.

Both of these studies suggest that financial support, while extremely important, is not enough to close the college attendance gap. Attitudes, self-perception, and other non-economic factors continue to play a role. As advocates press for increased financial aid and funding for programs like CDAs that help young people save for college, they should consider what efforts might complement these financial supports by helping students envision themselves as people who can and will attend college.

** There is a common perception that attending university costs much less in Canada than the U.S., but this is true mainly for students from middle and upper-income backgrounds. While America’s private colleges are much more expensive than Canada’s colleges, when you look at public schools the difference is smaller. In addition, the U.S. government provides more generous financial aid to low-income students, which more than offsets the difference in costs, while Canada provides more generous aid to middle-income students.

For a young person just finishing high school, unsure about what he (or she) wants to do in life, the military offers glory, adventure, and the chance to serve one’s country. It also promises more tangible rewards: a steady job, money for college, the potential for career advancement. Military recruiters and advertisements rely on images of heroism and duty, but they also tout the practical benefits of service. The question is, do these promises pan out?

A new study from RAND finds that there are long-term career benefits to joining the military. Individuals who enlist see a short-term jump in earnings of about 40% and a longer-term income boost of about 10%, compared to what they would be expected to earn if they didn’t enlist. The long-term boost is mostly among people who stay in the military, suggesting that military service may not help you find a better-paying job outside the armed forces but can pay better than the private sector if you stick with it. (This analysis doesn’t even factor in the free healthcare and other valuable benefits veterans receive.)

Interestingly, military service has a limited impact on the likelihood of completing college. Funding for postsecondary education has been a big enticement to potential soldiers since the G.I. Bill passed over 60 years ago. The RAND study finds, however, that those who serve are slightly more likely to complete a two-year college degree but slightly less likely to complete a four-year degree than those who don’t enlist.

“I reject the idea that asking a hedge fund manager to pay the same as a plumber or a teacher is class warfare. It’s just the right thing to do… This is not class warfare. It’s math. The money’s gonna have to come from someplace.” – President Obama speaking in the Rose Garden today

Today, President Obama unveiled a plan to reduce the deficit by $4 trillion and pay for the new round of economic stimulus, the American Jobs Act, he sent to Congress last week. In a Rose Garden speech about the plan, the President repeatedly emphasized the idea that spending cuts need to be balanced with tax increases. What will likely be one of the most controversialelements of the plan is Obama’sproposal that individuals making over $1 million pay a certain minimum tax rate. Nicknamed the “Buffett Rule” after Warren Buffett’s advocacy of higher taxes for the super-rich, the proposal aims to rectify the fact that, due to the quirks of our tax system,some ultra-wealthy individuals pay lower effective tax rates than upper-middle income households.

Some of you may be scratching your heads, wondering, don’t we already have a tax that’s designed to ensure the wealthiest households pay a certain minimum tax rate? Why, yes we do: the Alternate Minimum Tax or AMT. Individuals with income above a certain threshold have to calculate what they owe under the AMT, which has a different set of rules than the regular income tax system, and then pay whichever is greater, their regular income tax or the AMT. Why do we need a millionaires’ tax if we have the AMT? Simply put, the AMT is not achieving its intended goals. Continue reading →

One of our biggest long-term economic challenges is the exploding cost of healthcare. From 1999 to 2009, per capita healthcare spending grew at two and a half times the rate of inflation. Healthcare spending now constitutes 17.6% of our GDP, compared to 13.8% in 1999, and is expected to account for half of GDP by 2082 if current trends continue.

I’ve been focusing my posts this week on unemployment and what we can do to address it. Previously I provided an overview of the current situation and looked at the causes of unemployment.

Last night, President Obama presented the American people and a joint session of Congress with his plan for tackling unemployment and spurring economic growth. He repeatedly exhorted Congress to pass his package, The American Jobs Act, “right away.” Should they? Here’s a look at the main components of his plan and whether or not they’re likely to help create jobs…Continue reading →

In anticipation of President Obama’s major jobs speech tonight, I’m focusing my posts this week on unemployment and what we can do to address it. Earlier I gave an overview of the situation in 10 Essential Facts About Our Unemployment Crisis. In today’s post, I try to understand where exactly the problem lies.

The recession officially ended in mid-2009 when we halted our economic freefall and slowly started to turn the ship around. But the recovery has progressed more sluggishly than people imagined it would – and slower than previous recoveries – and unemployment still stands at 9.1%. With the recession officially over for two years now, what is holding back employment from returning to pre-recession levels?

There was little economic news for American workers to celebrate this Labor Day, given the dismal employment statistics released by the Bureau of Labor Statistics on Friday. This Thursday night, President Obama will respond with a major speech on his plans to improve the economy and specifically to boost job growth. With that in mind, I’ve decided to focus my posts this week on jobs and unemployment. To start off, here are 10 key facts you should know about our current unemployment crisis…

In Right vs. Left I examine what the think tank pundits are saying about a specific policy issue.

The Obama administration recently announced that the Department of Homeland Security will review its 300,000 active deportation cases to identify and focus on immigrants who pose a threat to national security or public safety, or are repeat immigration law violators. Low-priority cases will be suspended and it is unlikely new cases will be brought against illegal immigrants who do not pose a threat. Under the new policy, young people who came to the U.S. as children, members of military families, same-sex partners of U.S. citizens, and others with extensive ties to the U.S. may be able to avoid deportation.

There are 11 million individuals in the US illegally and this policy change could have a big effect on who gets deported and who does not. Prioritizing the deportation of dangerous individuals is nothing new. What is new is the administration’s statement that it will forgo deportation of individuals identified as low-priority. Some may be allowed to apply for work permits.